Aurubis AG (NDA) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Aurubis Analyst Call. [Operator Instructions] Let me now turn the floor over to Elke Brinkmann.

Good afternoon, also from my side, and a warm welcome to the conference call on the results of the first 6 months 2024-'25 of Aurubis AG. We from Investor Relations are here with our CEO, Toralf Haag; and our CFO, Steffen Hoffmann, who will present the figures for the first half year of 2024-'25 and current developments at Aurubis. After the presentation the floor will be open for questions. [Operator Instructions] But first, a brief reminder of the disclaimer on forward-looking statements. Today's capital market presentation contains forward-looking statements about Aurubis' plans and expectations. These statements involve risks and uncertainties that could cause actual results to differ naturally from those anticipated. Let me now turn the floor over to Toralf Haag.

Thank you very much, and good afternoon, ladies and gentlemen. Welcome from sunny Hamburg, and thank you for your interest in Aurubis. Like said, we would like to report on the first 6 months of our fiscal year '24-'25. Aurubis remains resilient even in a challenging environment with an operating EBT at EUR 229 million, almost at the same level as the previous year, underlining the strength of Aurubis' solid business model. EBITDA came in at EUR 341 million, also at last year's level. The return on capital employed increased slightly to 10.2% compared to the previous year. The better earnings situation more than compensated for the increase in capital employed for executing our growth projects. The net cash flow came in at EUR 190 million, well above the previous year's low level of EUR 5 million due to the robust earnings situation and comparatively lower inventories. The free cash flow improved as well compared to previous year, as we will highlight later in the presentation. Finally, looking ahead, we confirm the guidance of an operating EBT between EUR 300 million and EUR 400 million. And from today's perspective, expect an operating EBT around the midpoint of the forecast range for the whole fiscal year '24,'25. Before we come to the developments in our key markets, I would like to comment on a topic that has moved the market in the recent weeks. I'm sure you are all aware of the economic uncertainties created by the announcement of tariffs, in particular, imports to the United States. So far, copper imports to the U.S. have not been affected by tariffs since they were not included in the reciprocal tariffs that were announced on April 2 of this year. However, a Section 232 investigation under the Trade Expansion Act is currently underway. The aim of this investigation is to determine if and the extent to which copper imports are a concern for U.S. national security, which could potentially lead to import, export restrictions for copper raw materials and products. While the exact time frame of this investigation is not clear, it is generally expected to be concluded by November of this year at the latest. Turning to the effect on Aurubis. It is important to highlight that in the last fiscal year, less than 1% of our sales were generated in the United States. Nevertheless, with our investment in Aurubis Richmond, we see ourselves well-positioned in the U.S. copper market. Potential trade barriers for copper would likely be followed by increased demand for local smelting and refining, a segment in which Aurubis is currently establishing capacities. Overall, we continue to monitor these developments very closely, not only to mitigate risks but also to identify potential opportunities. Looking now at the market developments throughout the second quarter, you can see some changes compared to the last quarter. Overall, the copper and metal prices showed some positive momentum in a quarter-on-quarter comparison. The global concentrate market was influenced by high demand from the smelter industry. While this was met by slight concentrate supply growth from the mining industry, there was surplus demand for copper concentrate, so that treatment and refining charges continue to decrease on the spot market. Aurubis remains well supplied with materials in terms of both the quantity and the quality of concentrates via its diversified supplier base with long-term contracts. Aurubis' physical concentrate supply situation is covered well into Q4 of this fiscal year '24-'25. Looking at the recycling markets. In the first half year, we saw a stable supply of scrap and blister copper for our secondary smelters. For other recycling materials, we also saw a stable supply with mostly stable refining charges at a group level. Looking forward, our production sites are already supplied with material until the end of the third quarter of this fiscal year '24-'25. Sulfuric acid. The sulfuric acid market showed positive demand from the fertilizer and chemical industry in the reporting period, while delivery bottlenecks of liquid sulfur for sulfur burners tightened the supply. Given the current market situation, Aurubis continued to benefit from the sulfuric acid market and saw significantly higher revenues in the reporting unit. Copper products. We saw an ongoing robust demand for copper and copper products in Europe and our offtake markets. U.S. dollar, this is unchanged. Aurubis' long U.S. position remains at approximately USD 560 million for this fiscal year. We have 70% of the U.S. exposure -- dollar exposure hedged at [ 1.085. ] For the next fiscal year, '25-'26, around 42% of the exposure is hedged at a rate of [ 1.08. ] For more details on the financials, I would like now to hand over to my colleague, Steffen Hoffmann.

Thank you, Toralf, and a warm welcome also from my side. Let's have a look at the financial figures for the first 6 months. Revenues came in higher compared to the previous year, driven by significantly higher copper and precious metal prices. The gross profit was at EUR 850 million and thus slightly below the previous year level. Despite the challenging market environment and higher launching costs for the strategic projects currently in implementation, Aurubis generated a robust operating EBT of EUR 229 million. The main drivers were considerably higher year-over-year metal result due to increased metal prices, significantly higher sulfuric acid revenues, and robust earnings from copper products. On the other hand, we were faced with decreased concentrate throughput with lower treatment and refining charges and a mild decline in earnings from the processing of recycling material. Based on the rolling 4 quarters of the EBIT, this results in a ROCE of 10.2% despite much higher capital employed due to strategic investments. I'm moving on to the gross margin. We generated a gross margin of more than EUR 1 billion in total, well balanced across our different income components. This is yet another sign of the resilience of the Aurubis business model with its various earnings drivers. For metal result, we achieved a significant increase year-over-year as we benefited from higher metal prices, in particular for copper, gold, and silver. Our premium and products business remained stable with an increased contribution from the sale of sulfuric acid. Last but not least, as a result of the reduced concentrate throughput at lower TC/RCs, the contribution from treatment charges fell below last year, and refining charges for recycling raw materials were slightly reduced. In the CSP, in the Custom Smelting & Products segment, operating EBT increased to EUR 242 million. The positive trend in the segment resulted from a significantly higher metal result, notably increased sulfuric acid revenues, and robust copper product revenues. Compared to the same period last year, lower concentrate throughput, coupled with reduced treatment and refining charges, and lower revenues from the processing of recycling material had a counter-effect. Adding these parts together, the return on capital employed increased to 16.8%. The influence of the improved earnings situation more than compensated for the rise in capital employed due in part to growth investments for the Complex Recycling Hamburg, CRH project, precious metals refinery Hamburg, and the tankhouse expansion in Pirdop in Bulgaria. The Multimetal Recycling segment generated an operating EBT of EUR 51 million. The reduction in earnings was primarily due to higher launching costs for our U.S. Aurubis Richmond site. As expected, the launching costs are higher than last year, but they are fully in line with plan, so they are not higher than planned. In contrast, higher material prices led in MMR to a significantly improved metal result, with simultaneously higher revenues from copper scrap and blister copper attributable to throughputs of these materials. Combining lower EBIT for the rolling past 4 quarters with increased capital employed due to investments in Richmond, the segment's ROCE came in at 3.9%, below prior year figures. If we look on the next chart at our expenses, total group costs decreased by more than 5% compared to last year with minor movements between the expense positions. Important to mention here, the reduction in group costs compared to the previous year was impacted by the sale of the Aurubis Buffalo site. Having provided you with an overview of our cost split and the factors that influence the development, I would like to draw your attention to measures that we introduced in order to strengthen our cash flow profile in the medium term. At the beginning of our presentation, we highlighted challenges in our market environment. And from today's perspective, the uncertainty of the markets will remain high in the coming years. For this reason, we've decided to take steps designed to help us weather this more challenging economic environment. What are those measures? So through targeted working capital initiatives, such as optimizing our finished goods inventories as well as managing intermediates more efficiently, we intend to generate a mid-3-digit million cash flow contribution in the midterm. On the cost side, we will reduce, in particular, G&A expenses by a mid-2-digit million figure in the midterm. The areas in which we want to be particularly more cost conscious are costs for consulting services, G&A expenses, and travel expenses. With these measures, we will have a noticeable impact on cash flow generation and sustain our competitiveness. Moving on to the cash flow bridge on the next chart. As a consequence of our robust first half-year performance, Aurubis generated an operating EBITDA of EUR 341 million, on par with the previous year. With lower inventories, higher receivables, and slightly increased liabilities, total change in net working capital decreased by EUR 110 million. Other positions amounted to EUR 10 million and taxes to minus EUR 51 million. So that in total, net cash flow was plus EUR 190 million. This was significantly above the low prior year level of EUR 5 million and represents a more decent conversion from EBITDA towards net cash. Considering the higher level of receivables at the cutoff day and that they will convert into cash flow in the second half, we remain on track to meet the guided range of EUR 500 million to EUR 600 million for the full fiscal year. In general, I want to flag, however, that net cash flow is subject to fluctuations over the course of the fiscal year, which balance out again as the year goes on. This is just the normal development. The cash outflow for investment activities includes our baseline investments as well as those to execute our growth strategy and will lead to higher EBITDA contributions in the medium term. Here, we expect intensity in the second half to be higher than in the first half. With interest payments at a low level of EUR 14 million, free cash flow added up to minus EUR 151 million. This is a significantly better result than in the low prior year. Regarding the dividend payment, please keep in mind that unlike in the previous year, dividend disbursement was not in Q2 and instead took place in Q3 of the fiscal year. Aurubis' key performance indicators on the balance sheet side show a healthy and robust picture with a debt coverage close to 0. The equity ratio was at 55.6%, remaining well above the target level. Debt coverage increased to 0.3, driven by the acquisition of additional bank loans amounting to EUR 200 million under attractive conditions. CapEx was as planned at a high level, EUR 340 million, which is significantly higher than previous year. This represents a further step in executing our strategic project pipeline. After EUR 1.1 billion of the EUR 1.7 billion CapEx program had been realized by the end of the last quarter, and from a cash flow perspective is behind us. The substantial increase in capital employed to EUR 4.1 billion is a consequence of ongoing strategic investments and increases in our asset base. And on that note, I'd like to hand over to you, Toralf.

Thanks, Steffen. Let's take a look at the strategic projects. This overview is well known to you, just to repeat of the time line of the strategic projects. Aurubis continues to deliver on what we promised. The first strategic projects have now been commissioned and are being ramped up. The first projects like ASPA, BOB, and industrial heat phase 2 are in operation and will gradually deliver on the expected and guided EBITDA contributions once fully ramped up. At Aurubis Richmond, the pre-commissioning of the first stage has already started and will be further intensified in the coming months. Commissioning of the first stage is scheduled to begin in this fiscal year '24-'25, with a subsequent ramp-up over the course of 2026. Executing the approved strategic project remains one of the key priorities for the Executive Board and for Aurubis. The time line for the start of operations of the strategic project remains as laid out for the coming fiscal years, and as such corresponds to when the first revenues will be generated. Let's analyze how project progress corresponds with our CapEx spending. Once again, significant progress was made on the strategic agenda in the first half of the fiscal year '24-'25. As just mentioned, the first projects were inaugurated, and additional projects from our strategic agenda are progressing well. In the first 6 months of this fiscal year, CapEx at the group level totaled to about EUR 340 million, around EUR 220 million of which were spent on strategic investments. For the full year '24-'25, we remain on track to reach our target investment of EUR 820 million. As of the end of the second quarter, Aurubis has spent EUR 1.1 billion for strategic investments since the launch of the group's strategic agenda. Roughly 65% of the anticipated CapEx for the strategic project is now behind us. As already announced, this fiscal year will be another year of high spending before the group's CapEx level normalizes again. We will continue to invest in our baseline to improve efficiencies and strive for higher production asset reliability. To summarize, Aurubis remains well on track. We continue to progress on the reported investments with a clear focus on the execution of the project and good management of the operating business. Let's move to the outlook for the markets for the fiscal year '24-'25. The concentrate market is seeing increased demand from the smelter industry that is outpacing supply growth from the mining side. Therefore, the copper concentrate market is expected to be in a slight deficit. Despite the tighter concentrate markets, we are already fully supplied with contracted concentrates for the current '24-'25 fiscal year. Our primary smelters are already supplied physically well into Q4 of this fiscal year. For the recycling markets, we anticipate satisfactory supply at the group level. The recycling market remains a short-term market influenced by short-term developments and factors like collection rates, metal prices, and Chinese imports. For this fiscal year '24-'25, we anticipate a slightly lower earnings situation from recycling materials compared to last year. In line with our broad supplier base, the secondary smelters are physically well supplied with recycling materials until the end of Q3 of this fiscal year. Sulfuric acid. Based on the latest market developments with good demand from the European chemical and fertilizer industry, we expect very strong revenues from sulfuric acid sales. On copper products, we continue to expect stable demand for wire rod, driven by the infrastructure sector, and demand for cast shapes to be slightly lower than the prior year due to the sale of Aurubis Buffalo flat-rolled products and expected below previous year levels. Coming to our guidance. We are confirming our full year guidance, which is based on our latest assumptions for both earnings drivers and cost components. For the group results, we currently expect an operating EBT around the midpoint of the EUR 300 million to EUR 400 million forecast range. The operating return on capital employed is expected to be between 7% and 11% for the Aurubis Group in the fiscal year '24-'25. This range already includes an approximately EUR 50 million EBT effect for ramp-up costs. In the Multimetal Recycling segment, we anticipate an operating EBT between EUR 50 million and EUR 110 million and an operating return on capital employed between 4% and 8% for this fiscal year. The ongoing low segment ROCE arises from the anticipated results of operation with increased capital employed to the ongoing high investment. Furthermore, the maintenance shutdown in Lunen in May with a negative EBT effect of EUR 10 million is already included in these figures. For the Custom Smelting & Products segment, we expect an operating EBT between EUR 310 million and EUR 370 million and an operating return on capital employed between 14% and 18% for this fiscal year. The maintenance shutdown in Pirdop in May, June of this year, '25, with a negative EBT effect of EUR 34 million, is also included in these figures. Let me wrap up our presentation. And for that, I would like to summarize the highlights of the last 6 months. Our resilient business model has proven itself once more, which is reflected in robust earnings of EUR 229 million and an EBITDA of EUR 341 million. Earnings in our Custom Smelting & Products segment increased year-over-year despite the challenging environment, and Multimetal Recycling improved its gross margin while still digesting ramp-up costs from strategic investments. Our cash flow generation was above the low previous year level, and the implementation of our strategic program continues to be on track. For the second half, we anticipate ongoing volatility in the markets. However, based on our well-diversified earnings portfolio, we will cope well with the challenging environment, due in particular to significantly improved sulfuric acid sales, solid earnings from copper product sales, and a good metal result. Combining the performance of the first 6 months and the outlook for the remainder of the fiscal year, we continue to feel comfortable with our guidance and expect it to deliver an EBT around the midpoint of our range. With this, I would like to thank you for listening and would like to hand over to Elke Brinkmann again.

Thank you, Toralf and Steffen. Before we start the Q&A session, I would like to provide you with an outlook on the publication of our 9-month figures on August 5. With this outlook, we would like to thank you for your attention, and I would like to ask the operator to take over for your questions.

[Operator Instructions] And first up is Daniel Major from UBS.

First question, you talked about the benefits from sulfuric acid pricing in the quarter. Can you give us an EBITDA contribution bridge in the second quarter, the benefit from sulfuric acid pricing quarter-on-quarter, and also the offsetting drag from lower treatment and refining charges?

Daniel, this is Steffen. Thanks a lot for your question. We would try to do it a bit more qualitatively. On the sulfuric acid prices, you've seen -- on the revenues, you've seen that kind of production was slightly below prior year, just 1%. So in other words, when we talk about higher sulfuric acid revenues, obviously, it has to do with prices, significantly higher earnings here. We -- the drivers, I think, are known. Toralf also alluded to them. We would not give you -- or would not be in a position to give you an exact figure. But I would say that in the reporting period, this was a lower to mid-2-digit million-euro figure. On the TC/RCs, we've seen a Q1 where we basically were almost not yet really hit by TCs. We see a Q2 where we were hit a bit more by TCs and RCs. And part of the guidance is obviously that in the second half, we will be seeing a bit more of an impact. Also here, we would not give an exact figure. But roughly, we could say that what we kind of gained on sulfuric acid would be similar to what we are a bit under pressure as planned on TC/RCs.

Okay. And just maybe a follow-up on the sulfuric. I mean it looks like on your slide -- just getting to the right one, sorry. The direction of the sulfuric pricing moderated towards the end of the March quarter. Has that -- how has that trend continued into the second quarter of the fiscal year? And as a consequence, based on that trend, it looks like [ prices ] are trending lower.

Yes. Daniel, I suppose you are referring to our Page 5, right, where...

Yes, that's right. Yes.

This green line, we see a slight decrease between Feb figure and March figure. So if the background of your question is, will this line now go -- continue to go down and down and down? The answer is no. We think that this is rather a flattish development on a very comfortable level. This is also the reason why in the full year guidance, we changed our wording upwards to saying we now see significantly higher sulfuric acid revenues versus an older wording. So in a nutshell, we are confident that this very supportive trend continues. As I said, we would see it flattish on this comforting level.

The second question, just around the mechanics in the U.S. You indicated that you don't have obviously a lot of exposure now. Two questions. Once Richmond is up and running, do you get benefits from the COMEX premium in -- if that were to persist over the next few years?

Yes, Daniel. This difference in COMEX, we wouldn't have a direct impact, but an indirect impact because we would expect slightly higher TC/RCs for our scrap material compared to other regions of the world.

Okay. So it doesn't offer upside to your targeted EUR 260 million of incremental EBITDA if that were to be a medium-term premium?

No major upside, no.

Okay. And just next one on the same subject. If copper is classified as a critical raw material in the U.S. and processing -- and businesses are eligible for 45X tax credits, would that be a significant benefit to Richmond?

Well, there would be a benefit. But again, the benefit would be overseeable. It wouldn't be massive.

And next up is Maxime Kogge from ODDO BHF.

Two questions on my side. So I'll start with the first one is a follow-up on the COMEX because actually, from what I can see, you are 1 of 2 European manufacturers with cathode [indiscernible] for the COMEX along with Atlantic. And I was wondering if that was something from which you were able to benefit already? And if you had plans to increase the sales of cathodes towards the U.S. in the coming months, or rather focus on processing them internally for sale in Europe? So that would be my first question.

Well, as you know, our operation there, U.S., is to play a role in the U.S. copper market. So we would benefit there, producing copper in the U.S. market. Right now, the sales to the U.S. is limited, but this is one thing we are looking at to increase our sales to the U.S. when there are no import tariffs to benefit from this. So this is something we are looking at currently, but no major positive earnings contributions yet.

The second one is on U.S. scrap exports to China, which have collapsed in recent months. So I was wondering if that could have some effect on the European market where if China cannot import any more from the U.S., perhaps it will look to import more aggressively in which case that could hurt the refining charges on recycling input. Is that something you have already witnessed? And is that something you are afraid of in the coming months?

No. First of all, this development helps us in the U.S., of course, because there's enough material available, which we use for our Richmond facility. And secondly, we don't see a negative effect on our European scrap supply, firstly, because there is solid growth of the availability of scrap material through various measures. And secondly, we have long-term frame contracts with our scrap suppliers. So we don't see any negative effects there yet. But we are watching it closely, of course.

And the next question comes from Felicity Robson from Bank of America.

Could you provide any color on your contract book for TC/RCs as contract roll off and any protection you may have into the next fiscal year, please?

Yes, Felicity, I mean, I think as Toralf has said, we are contractually very well booked on another call -- not today, but on another call, we said, and I can repeat it here because it's obviously still valid, that contractually, we usually cover 90% of the concentrate supply. This is true for this fiscal year. It's, by the way, also true for the upcoming fiscal years. So contractually, we have long-term contracts, and 90% is contractually secured. It's even in our interest that it's not 100% so that we have a certain piece of flexibility. And then physically, as Toralf said in the speech, obviously, on concentrates, physically, you have a little bit of a further reach, and you need to have it because of the delivery and the logistics behind it. So we did say that physically on concentrate, we are well supplied for this fiscal year. And on the scrap, where all the players have a little bit of less visibility and everything is a bit more on short-term, we were saying that we have a physical supply well into or towards the end of this Q3 of our fiscal year.

And next up is Bastian Synagowitz from Deutsche Bank.

My first one is a quick follow-up just on your -- the processing of your primary material. Is there any color which you could give us on how much of the concentrate you processed in the second quarter was actually still from inventory, which you may still have been bought at the old terms on the basis of the old benchmark? And then maybe related to that also, has there been any changes to the free metal terms in the new TC/RC agreement? And if so, is there any color as to how much? That's my first question.

Yes, Bastian. In Q2, the majority of the concentrate used was still from the stocks. Now also with the new material we buy, we are not -- like you mentioned, they are necessarily completely linked to the spot TC/RCs because like Steffen has mentioned, we have long-term contracts. So we are somehow uncoupled from the spot TC/RCs. And on the new contracts, the free metal pricing has not changed, same as before.

Okay. Understood. And then next one, maybe just on your cash flow. I think you seem to be very comfortable, particularly on the receivable side to reverse the working capital this year. At least when we look at the, I guess, the IFRS, net income obviously has been very positive, also benefiting from your hedging. So your free cash flow guidance, nevertheless, has been obviously unchanged or your net cash flow guidance. Is it fair to assume that, that has become by now reasonably conservative?

Well, Bastian, we are in the mid of the year. So that's why we think it's adequate to confirm it. We feel comfortable with it. And there is still some way to go, but we feel really comfortable with it. So you can call it as conservative as a Hamburg-based company should be.

Okay. Got you. All right. And then maybe last one is on -- just on the European metal action plan. Could you maybe just spend a couple of seconds just to step through that, what it could mean for you, and what you're reading into it, that would be great.

Well, I think we still have to analyze this in detail. But in general, this is positive for us because it underlines the necessity of raw materials and especially the materials we are producing. So in summary, this should be positive for us. But you know how these plans are, it takes a while until the effect comes to tangible results to the companies. But in general, also for the sentiment, this is positive for us.

And would this also more come from a possible, I would say, like a scrap export ban? Or what is actually -- what would be the main driver here to watch out for?

Yes. I think on the one hand, the support of the European companies. Secondly, the buildup of more infrastructure for circular economy and for scrap collection sites. And then last but not least, like you said, some restriction on the import of scrap from other countries.

And perhaps, Bastian, if I can add here. Just recently, we were honored to have the visit of the European [Foreign Language] President, Mr. Costa, who was in Hamburg and who visited also Aurubis, and we had the possibility to share with him let's say, the perspective of a European industrial business. And obviously, what we also perceive as potential impacts or the necessities we see from a geopolitical standpoint, U.S., China, and what Europe should take -- what stance Europe should take on. And as you are mentioning the European metals action plan, we also had the chance to highlight that 3 of our metals that we are producing are seen as critical ones here. And we understood from the EU Commission that they are in -- let's say, in an opinion-building process of how to -- what to do to support companies like ours in this, let's say, more geo-relevant, I don't want to say war, but in those geo-relevant developments. So we are confident that we get more support from the lawmakers on the regulatory side to also ensure that Europe has a strong foothold in our industry.

And the next question comes from Christian Obst from Baader Bank.

First question concerning the depreciation. It went up to EUR 57 million in the second quarter. So what is not only the run rate, but what will be the high point? And when do you achieve it? Should it be around EUR 65 million per quarter or EUR 250 million, EUR 260 million per annum going forward? So what is the expectation here?

You're right, Christian. In the 6 months, we had EUR 110 million. And for the full fiscal year, I look at a line item here that says around EUR 233 million. So if I say EUR 233 million, I probably can skip the word around.

And the upper end, which will be reached in the next year or even '26-'27, would be around EUR 260 million or even more?

A bit more -- a bit closer to EUR 300 million. So let's call it around EUR 280 million.

Okay. First question. Second one is concerning the ramp-up, the entire situation in the U.S., the 2 stages here. So what are the main difficulties currently for any kind of ramp-up or the risks that you do not reach or may not reach a decent production mid next year?

Well, as we have said, we already had the pre-commissioning of the first stage, and we want to finish the first stage at the end of this fiscal year. So we are pretty far in the process. So I think there are no major risks that this could go wrong. Of course, there could be the one or other delay because it's a greenfield plant, as you know, but it's a process we know, which we have implemented in Europe a couple of times, and we have our engineers also from Europe on site to facilitate the start-up. So right now, the risks are, I would say, normal risks that some supplies are not coming on time, or some smaller devices don't work, but we don't see any major risk at the moment.

Okay. And then coming to the European network. So you invested already a lot and you're still investing into the European network to optimize it and maybe also to increase a little bit the output and so on and so forth. But when I look back to the quarterly production rates of the last 4.5 years, so the current production or last half-year production was below or best at average of the last 4.5 years. So what kind -- or whether you expect some kind of a meaningful impact or increase of products or metals in the quarters or years to come? Or should it be at the same level, and you are only being more a little bit more productive because so far, we do not see any kind of improvement when it comes to volumes.

Yes, your observation is correct. Nevertheless, as you know, we have invested in the last months and years quite significantly in our processes and capacities. So we expect over the next years an increase in our copper output. So it's not a dramatic increase, but a steady increase over the next years. But we also expect an increase of our other metals, of our precious metals and the other metals that we produce. So following the investment in our European sites, we anticipate a growth in copper and also the other metals, a moderate growth in output over the next years, continuously.

Is there any kind of -- any reason of why we do not have seen any improvement despite the investments already done?

Well, one reason is, of course, the shutdown and the investment in -- to be ready for H2 in our site in Hamburg, where we had some storms in the summer when we ramped it up, but those are now behind us. And I would say there's no specific reason, but the investments and the ramp-up of these investments in the past years and combined with some standstills, but we expect now in the years to come that we come in a more steady state when these investments are behind us, and then we can continuously ramp it up.

Okay. And then last question on that. Is there some kind of a deterioration of the other metals included in the concentrate or in the raw material you are acquiring?

No. We don't see any deterioration of any metals. The composition is -- continues to be attractive for us, both on the concentrate side, but also on the scrap material side. So -- and what we are trying to improve, for example, with our investment in the precious metal facility or in the complex recycling facility in Hamburg to even increase the output and what we can get out of these materials in form of metals. So no, we don't see any deterioration there.

At the moment, there seem to be no further questions. [Operator Instructions] And next up is Boris Bourdet from Kepler Cheuvreux.

Aurubis is a very appealing story over the medium term, and a play on copper and the scarcity of primary copper. But in the short term, investors are a bit shy on the name, notably because of the situation on the TC/RCs. From the current perspective, just to try to reassure, would you say that it would be fair to expect earnings to reach a low point this year and to rebound next year? That's my first question. And in the U.S., if there is some restriction of exports of copper from the U.S. following the Section 232 investigation, would it have an impact on your metrics on the Richmond project?

Yes, Boris, thanks a lot for your questions. I take the first one. Toralf, the second one on Richmond. On your question kind of putting it into perspective, the weight of TC/RCs and how we look at the various levers. I mean, first of all, I would like to reiterate the macro trends that are important for our business model, which is a business model that stands on various legs, those macro trends are completely intact. So multimetal is needed everywhere across all sectors throughout the transformation. Today, we've confirmed again the guidance even in a challenging environment. And we also now kind of wrote it with the pencil that we see -- expect around the mid-range. So let's say, in a difficult environment, we just want to send a statement of continuity and also confidence on the profitability potential of Aurubis, obviously, with all the ambition to get more profitable when the EBITDA contributions of the strategic projects will kick in. Also, I want to put a bit into perspective, TC/RCs and its weight on our profitability. As you see on the Page 7, where we talk about the gross margin, you see that roughly 1/3 of the overall gross margin is TC/RC, and within this 1/3, half of it is TC and half of it is RC. So in other words, the TC, what we really talk about at the moment, concentrates and so on, TCs are 1/6 out of our gross margin, just to put it in perspective. Obviously, on TCs, all of you, and I would agree, we see a bit low for longer. I don't say lower for longer. I see low for longer. So I want to basically make the point a slow recovery. But then I also would just briefly share our view on the other levers. So sulfuric acid, it's early days. It's way too early to talk about our guidance for next fiscal year. But I said earlier, as of now, we see this flattish on a high level. So we see no negative signs. Free metal, we all know where gold and silver prices are going. To a certain degree, we will enjoy increasing metal prices as obviously, we are not completely hedged here and still have a significantly open exposure. Next year, there is no plan still stand. So it should help us on the concentrate throughput side. There will be the first EBITDA contributions next year from strategic projects. So let's call it a lower double-digit million-euro amount. However, obviously, more strategic projects and as Richmond will go live, then in the next fiscal year, we will also see the higher depreciation. That's obviously a negative term versus this year or in other words, higher depreciation next year versus this year. And last but not least, we talked today a bit about the self-help measures on the cost piece on net working capital to kind of do our homework in all areas. With all of that, I'm explicitly not giving any guidance on the next fiscal year. I just want to put it a bit in perspective qualitatively where we see the various levers going.

And just to detail a bit, you said the first EBITDA contribution from projects. It's a low double-digit million-euro amount. What would be the increase of the depreciation? Would it be offset by the increase in depreciation, or the increase in depreciation would be a lower number?

For the next fiscal year, the increase in depreciation would be higher than the first EBITDA contributions. And we said earlier that -- we talked about depreciation, right, of EUR 280 million next year and EUR 230 million this year. So the gap is EUR 50 million, and the contribution, I said what I quoted as a lower double-digit figure of EBITDA contributions of the strategic projects, lower would not mean EUR 50 million.

On your second question, Boris, on the import tariffs in the U.S., if they should come through, I mean, we are invested there. We have local supply, so we would not be affected by this. And the plan is to have the majority of the raw material, secondary material for our smelter there supplied in the U.S. And that's the strategic beauty of this project that we are independent somewhat from the tariffs.

Okay. But you would then have to export those copper blister that you would produce from the materials?

There, we are also flexible. Right now, the plan is to export part to the Europe and part to sell in the U.S., but there, we are flexible. We can go both streams.

The next question comes from Ioannis Masvoulas from Morgan Stanley.

A few questions left from my side. Just starting with the first one. On the EBT guidance for the year, if we look at the MMR segment, the low end of the range suggests no profitability in the second half or close to 0 profitability in the second half. What sort of scenario would get us there? Because there is certainly more maintenance in H2 as compared to H1, but what are the other negative drivers that would get us there, perhaps FX or anything else that you'd like to highlight? And I'll stop here for the first one.

Ioannis, that's a very good observation and gives also us the opportunity to clarify what we do not want to say. So after 6 months with EUR 51 million EBT on MMR in the books and the full year guidance now at the lower end of EUR 50 million. So we are not saying that we fear that H2 would be a 0 or even slightly negative. This is definitely not what we are saying. So we see a positive contribution. We rather see us in MMR at the upper -- close to the upper part of this range. We just did not want to now in detail adjust here the guidance. We feel comfortable with this guidance. But obviously, after 6 months, we, once again, more on the upper part of this range. Just a bit more content-wise, we know the segment profitability appears to be quite low, as I alluded to. I just want to stress the point that the gross margin in the first 6 months on an absolute basis was at EUR 31 million, which is, let's say, a comforting sign, and we feel comfortable on the business. We expect then beyond this year also higher profitability in the midterm, obviously, due to the omission of ramp-up costs and instead having positive contributions from the strategic projects, not only Richmond in this segment, but also BOB and ASPA. So once again, it's rather -- I just want to rather send a comforting message here that we have the opportunity at MMR to be close to the upper end of this range.

Second question on the free metal exposure. If I recall correctly, last year, management indicated a sensitivity for each 10% in the free metal price basket, translating to EUR 60 million to EUR 70 million EBITDA uplift. But clearly, gold and silver prices at the very least have reset quite a lot higher as compared to the levels we saw last year. Could you perhaps provide an updated sensitivity on your exposures there?

I think -- so you quoted the sensitivity, right? Based on last year, we said plus/minus 10% on the overall metal prices, on average metal price, average of all the metals would move the EBT by EUR 60 million in the one or the other direction. We have not calculated the new one. So let's say, for the time being, let's stick to the one we have.

Okay. Fair enough. And just the last question on -- going back to the U.S. potential to introduce tariffs. We've already seen a drop-off of scrap exports out of the U.S. as scrap is priced off of COMEX, which is very expensive. If tariffs were to come through, how do you see the market rebalancing because clearly, given the tightness in the concentrate markets, the global copper industry does need the U.S. scrap units. So you see the U.S. stockpiling scrap? Or do you think a bigger discount of U.S. scrap helping sort of resolve that equation, and material continues to flow as it did over the past couple of years?

Yes, I wish I could forecast what you're just asking. It's very difficult to forecast. I don't have a solid answer on your question. There are so many factors coming in with the political situation. And so I don't know how the government is going to react on that in U.S. Sorry, I don't have a solid answer on your question.

So my question is more about how the market would react. Let's say, we do have tariffs coming through at a certain level. And ultimately, U.S. scrap remains expensive. How does the global market rebalances? Would you expect potentially higher discounts for U.S. scrap to come through to help rebalance the market? Or is there a risk that a lot of the scrap gets stockpiled in the U.S., in which case it helps Richmond, but perhaps it doesn't help your European business as much because you are importing U.S. scrap into your European operations, as far as I understand.

Yes. So conceptually and in the short term, we see if there would be tariffs, higher TC/RCs for scrap in the U.S. But in the midterm, this should balance out. But in the short term, we could benefit from this enrichment through higher refining charges.

At the moment, there are no further questions. [Operator Instructions] There are no further questions. And with this, I hand back to Elke Brinkmann.

Thank you. The IR team will, of course, be happy to answer any further questions you may have. We would now like to close today's conference call, and thank you for your attention. We wish you a pleasant rest of the day. Thank you, and goodbye.